Space is a vacuum. i.e. The lack-of-a-thing that makes a thermos great at keeping your drink hot. A satellite is, if nothing else, a fantastic thermos. A data center in space would necessarily rely completely on cooling by radiation, unlike a terrestrial data center that can make use of convection and conduction. You can't just pipe heat out into the atmosphere or build a heat exchanger. You can't exchange heat with vacuum. You can only radiate heat into it.
Heat is going to limit the compute that can be done in a satellite data centre and radiative cooling solutions are going to massively increase weight. It makes far more sense to build data centers in the arctic.
Musk is up to something here. This could be another hyperloop (i.e. A distracting promise meant to sabotage competition). It could be a legal dodge. It could be a power grab. What it will not be is a useful source of computing power. Anyone who takes this venture seriously is probably going to be burned.
It probably increases Elon's share of the combined entity.
It delivers on a promise to investors that he will make money for them, even as the underlying businesses are lousy.
A Starlink satellite uses about 5K Watts of solar power. It needs to dissipate around that amount (+ the sun power on it) just to operate. There are around 10K starlink satellites already in orbit, which means that the Starlink constellation is already effectively equivalent to a 50 Mega-watt (in a rough, back of the envelope feasibility way).
Isn't 50MW already by itself equivalent to the energy consumption of a typical hyperscaler cloud?
Why is starlink possible and other computations are not? Starlink is also already financially viable. Wouldn't it also become significantly cheaper as we improve our orbital launch vehicles?
A single AI rack consumes 60kW, and there is apparently a single DC that alone consumes 650MW.
When Microsoft puts in a DC, the machines are done in units of a "stamp", ie a couple racks together. These aren't scaled by dollar or sqft, but by the MW.
And on top of that... That's a bunch of satellites not even trying to crunch data at top speed. No where near the right order of magnitude.
That doesn't mean you need a gigawatt of power before achieving anything useful. For training, maybe, but not for inference which scales horizontally.
With satellites you need an orbital slot and launch time, and I honestly don't know how hard it is to get those, but space is pretty big and the only reasons for denying them would be safety. Once those are obtained done you can make satellite inferencing cubes in a factory and just keep launching them on a cadence.
I also strongly suspect, given some background reading, that radiator tech is very far from optimized. Most stuff we put into space so far just doesn't have big cooling needs, so there wasn't a market for advanced space radiator tech. If now there is, there's probably a lot of low hanging fruit (droplet radiators maybe).
You'd be wrong. There's a huge incentive to optimized radiator tech because of things like the international space station and MIR. It's a huge part of the deployment due to life having pretty narrow thermal bands. The added cost to deploy that tech also incentivizes hyper optimization.
Making bigger structures doesn't make that problem easier.
Fun fact, heat pipes were invented by NASA in the 60s to help address this very problem.